Hey Lee Hsien Loong, Where’s Our Money Dude?
Every year whether it is the National Day Rally or the PAP Convention, our Dear Leeder dusts down last year’s speech, changes the dates, and gives the same address again and again without any sense of irony.
Since LHL controls the media we have to listen to the usual inanities about how GDP growth is better than expected and how Singapore will stay prosperous in contrast to democracies as long as the people stay united and cohesive (read this as giving PAP 100% of the seats in Parliament). Never mind that our GDP is an artificial construct driven by tax arbitrage and having no connection with the average Singaporean’s living standards.
This year was no exception. Fresh from jetting around the region to the APEC and ASEAN summits in his or his wife’s very own dedicated business jet, whose financing is as mysterious as the Lee family assets or Ho Ching’s remuneration, Lee Hsien Loong returned to his usual themes.
The most hackneyed was that as social and infrastructure spending was rising, taxes would have to go up. He says this every year and every year it is equally mystifying as there is no reason for it. As I have pointed out in frequent blog posts, to say that the Government’s true fiscal position is exceedingly comfortable is the understatement of the century. The 2017 Yearbook of Statistics (see here) gives the General Government cash surplus since 2009 as about $140 billion. The total General Government cash surplus since 2007 is over $220 billion. That is about $100,000 for every adult Singaporean.
But this does not begin to tell the full story. The Yearbook surplus is on a cash basis rather than an accrual basis, which is the basis recommended since 2001 by the IMF’s Government Financial Statistics (GFS) Manual. So it undoubtedly underestimates the total surplus by a substantial amount. Only actual cash paid to the Government, whether in the form of dividends, taxes or capital receipts is included. In particular the figure does not include the surpluses of public corporations such as GIC and Temasek which are not part of the General Government sector.
At the last election I proposed spending $6 billion more per year on social programmes such as an old age pension and child benefit but was met with a chorus from state media of how I would pay for this. In the midst of so much public sector largesse this is a ridiculous question. It is true we have a rule that only current revenues from taxes and fees plus up to 50% of the long term returns of Temasek and GIC can be used to finance both current and capital expenditure but even with this rule (which makes no economic sense) such additional spending would be easily affordable. At present most of the transfers from Temasek and GIC which are supposed to be available to finance expenditure are in fact recycled into long term funds which do not represent current spending at all. I have written on this extensively over the years and you can find some of the links below.
Of course when LHL talks about taxes having to rise he does not mean the top rate of income tax or corporation tax. Nor is he going to take any action to remove the glaring loopholes which favour the wealthy such as the lack of any capital gains tax, tax on dividends, interest or investment income. Like Trump, he wants to ensure that the tax system favours his family interests. I am no socialist and would prefer taxes to be as low as possible but I believe that in the interests of economic efficiency and equity the tax base should be as broad as possible. What LHL is talking about is undoubtedly raising the GST rate, maybe to 10% or higher, even though there is absolutely no revenue need. GST is a regressive tax and while there may be some economic arguments in its favour it should be offset by transfers to less well-off Singaporeans. This has never happened.
So , before going on about tax increases, LHL should open the books and let us see why they are necessary and if they are, why he cannot reduce the unfairness of our tax system first. The Government should also amend the absurd rule that investment needs to be financed out of current revenue and move towards producing a balance sheet that puts a value on infrastructure and other publicly owned assets like land.
As long as Singaporeans can be bought for a few hundred dollars worth of GST vouchers the likelihood of finding out the true state of the Government’s finances are somewhere between nil and zero.